Capital is a commodity

Charlie Graham-BrownContributor
Charlie Graham-Brown is the partner and Chief Investments Officer of Seedstars, a Swiss-based group with a mission to impact people’s lives in emerging markets through technology and entrepreneurship. He leads the group’s venture capital fund, Seedstars International, which invests in seed-stage startups across emerging markets.
Daniela MorenoContributor
Daniela Moreno is the investments marketing manager at Seedstars, a Swiss-based group with a mission to impact people’s lives in emerging markets through technology and entrepreneurship.

Even after the unprecedented year that we had in 2020, the VC markets picked up in 2021 and founders raised 157% more capital in the second quarter of 2021 compared to the previous year. Global VCs have invested $268.7 billion as of July 2021, already passing the total investment amount in 2020.

In emerging markets, where our company Seedstars focuses its attention, VC capital flow has been growing 40% year on year but still represents less than 4% of global volumes, despite accounting for the majority of the world’s population. Whether you think this is a bubble, one fact remains true: Capital is a commodity.

Some capital will flow faster than others and investment terms must be considered, but assuming all things are equal, the real value lies beyond the capital. It lies in the knowledge, network and support an investor brings to the table.

It is not only a matter of market perception or an identified trend. De Santis Breindel asked CEOs what was the top evaluation criteria when choosing a VC firm. Reputation of the firm came first place, followed by the ability to add value to portfolio companies beyond funding. So how has the industry responded to this?

“Smart money” and the VC platform

At some point, the concept of “smart money” slipped into the VC vernacular referring to the idea that some money also came with highly sought after expertise and the likelihood of crowding in other investors.

Today, the evolution of the concept has brought us the VC “platform.” Smart money was definitely a catchier phrase but not institutional enough to be turned into something official. The concept of a platform, on the other hand, gives more room for innovation but still leaves most founders (and even some platform managers) confused. So, the big questions are: What exactly is a platform? How does it bring value? Do you need it as a startup? How can you evaluate it? Read on.

T-shaped platforms and the Tetris fit

Keep two rules in mind:

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